Copper Market Trends Working for Miners

While most precious and base metal prices languished during March, copper posted a 7.5% gain climbing $431 per metric ton (mt) to $6,146/mt from $5,715/mt. The International Copper Study Group (ICSG) also released preliminary 2014 copper supply and demand data during March. The refined copper balance for the full-year 2014 indicated a production deficit of 475,000 mt. This compares with a production deficit of 270,000 mt in 2013.

During 2014, copper usage increased by 8% or 1.7 million mt to 23 million mt compared with 2013, supported by strong demand in China and a shortage of high-grade scrap that led to the use of more cathode. Chinese demand increased by 13.5% or 1.3 million mt based on a 14% increase in net imports of refined copper. World usage (excluding China) increased by 3%.

World mine production is estimated to have increased by around 1.3% or 233,000 mt to 18.3 million mt in 2014 compared with that in 2013. In 2014, production remained essentially unchanged in Chile and Peru—the first and third largest copper mining countries—and it declined by 26% in Indonesia.

Total refined copper production increased by around 7% or 1.5 million mt to 22.6 million mt in 2014 compared with refined production in 2013: primary production was up by around 8% and secondary production (from scrap) increased by 1%. The main contributor to growth was China with 14.5% or 970,000 mt. Output in Chile, the second leading refined copper producer, remained basically unchanged. The average world refinery capacity utilization rate for 2014 increased to around 83% from about 80% in 2013.

PRODUCTION COSTS CONTINUE TO DECLINEAfter a decade of rising copper mine costs, analysis carried out by SNL Metals & Mining based on its recently launched mine economics database showed that a steady decline in total cash costs has occurred over the past three years. The average spot price for copper was $5,700/mt in February, less than $2.60/lb, but remains comfortably above SNL’s prediction of this year’s average mined cost of $1.68/lb, calculated on a co-product basis. This compares with an average total cash cost of $1.71/lb in 2014 and $1.80/lb in 2013. The copper price averaged $3.34/lb in 2013 and $3.11/lb in 2014.

On a byproduct basis, the industry’s average cost this year is expected to be $1.26/lb, compared with $1.29/lb in 2014. Mining costs have risen recently but there have been offsetting credits from byproduct metals. Royalty charges have also steadily increased over the past decade.